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Social Media's Clumsy Ad Model Needs New Moves

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Social media advertising has stumbled in its current form, and needs new choreography.

That’s the blunt message that media consultancy Media Link has for MySpace. Media Link has been advising MySpace since August, following a major executive shakeup at the troubled News Corp. unit. That message might as well be aimed at the entire social media landscape, which generates a disproportionate amount of ad impressions but commands such low prices that some in the industry even speculate it could hinder an expected online advertising recovery.

Media Link president Wenda Harris Millard, who’s been directly advising MySpace, said that the site may require a dramatically different approach to advertising—including reducing the amount of ad inventory it serves.

“We’ve been talking to MySpace about two things,” Millard told Mediaweek. “One is that people need to think about creating scarcity. People talk about how you have to monetize every page. You don’t have to.”

Plus, traditional display ads simply may not be appropriate for social media sites, continued Millard. “The notion of advertising in a social environment is by nature intrusive. [That kind] of advertising doesn’t really work.”

Instead, Millard said that Media Link is helping MySpace explore creating several new ad products that are better suited to a social environment. “There is an opportunity for commercial messaging in MySpace. But I’m not sure if advertising is even the right word.”

MySpace should focus what it does best, said Millard, such as serving fans of particular music artists, and somehow exploit that passion for brands.

For its part, MySpace is being careful not to reveal too much about its ad plans. But clearly News Corp. knows it has a challenge on its hands. Besides hiring Media Link, last week the company lured MTV digital sales chief Nada Stirratt to become its new chief revenue officer.

Angela Courtin, MySpace’s senior vp, marketing, entertainment and content, hinted that new ad formats are coming soon, and that the site may indeed reduce some of its inventory.
“Inventory is something that can be dialed up or dialed down,” said Courtin. “We have to be really creative. It’s innovate or die.”

That goes for the whole category—from social media juggernaut Facebook to lesser sites like Classmates and Bebo. Recently, comScore reported that social networking sites now account for over 20 percent of all display ads viewed on the Web. Sellers report that CPMs can be as low as 20 cents on some sites.

Citing that dynamic, last week eMarketer issued a report which indicated that low CPMs may be holding back spending growth. “I don’t think this issue is going away,” said Debra Aho Williamson, eMarketer analyst.

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